LEGAL & REGULATORY

ASPECTS OF BANKING
A&B
jaiib
01..Day to day banking involves a number
of aspects. Utilizing the various provisions
of various Acts assumes greater
significance in the Banking field.
Knowledge about the same is very
important.
02..To function as a Bank and to obtain a
license from the Reserve Bank of India.
Such license is issued as per the
provisions of
a.. Reserve Bank of India Act
b.. Banking Regulation Act
c.. Constitution
d.. Both a & b
03..Under the provisions of the Banking
Regulation Act, no organization other than
a bank is authorized to accept deposits
with drawable by cheque. The Savings
Bank Scheme run by the government, a
Primary credit society and any other
person or firm notified by the government
are exempted from this prohibition.
04..Which one is the permitted business of
banks
a.. Opening and maintaining CASA
b.. Issuing of Postal stamps
c.. Selling of coins
d.. Selling Railway tickets
05..Which statement is incorrect. (Banking
business)
a.. Carry on and transact guarantee and
indemnity business
b.. Acquire, construct and maintain any
building for its own purpose.
c.. Collecting and transmitting of money and
securities
d.. None
06..Identify the Public Sector Banks
a.. Union Bank of India
b.. State Bank of Mysore
c.. Central Bank of India
d.. All the above
07.. CFD is an urban co-operative bank. E
customer of that bank wish to nominate for
his locker & Deposit facilities.
a.. Possible
b.. Not possible
c.. Nomination facility is only applicable for
Public sector banks
d.. Bank to suggest to E to have joint facility
instead of nomination
08.. Ways and Means Advances are
provided by
a.. Nationalized Banks
b.. Public Sector Banks
c.. Regional Rural Banks
d.. Reserve Bank of India
09.. Identify the power not pertaining to
Reserve Bank of India
a.. Power to license
b.. Power regarding audit of banks
c.. Power to impose penalties
d.. None of these
10.. There is a co-operative bank facing winding
up. The said co-operative bank is registered
under the Deposit Insurance and Credit
Guarantee Corporation Act. Then who has the
power to order its winding up.
a.. Reserve Bank of India
b.. State Government
c.. Registrar of Co-operatives
d.. None of them
11. The Reserve Bank of India is the
primary regulator of banks. But the Central
Government has also been conferred
extensive powers under the RBI Act and
BR Act either directly or indirectly over the
banks.
12.. Co-operative Banks come under the
control of RBI by virtue of certain
provisions of
a.. Reserve Bank of India Act
b.. Banking Laws (Application to Co-
operative Societies) Act,1965
c.. Banking Regulation Act
d.. All the above
13.. In respect of the terms and conditions of
service of its workmen, opening and
closing of its branch premises, a bank is
answerable to
a.. Its Corporate Office
b.. Reserve Bank of India
c.. Labor Authorities
d.. Its Head Office
14..RKL A Co-operative Bank has secured
permission to have branches in other
states as well.
a.. Multi purpose Co-operative Bank
b.. Multi State Co-operative Bank
c.. Multi Dimensional Co-operative Bank
d.. Multi Co-operative Bank
15.. Identify the odd one
a.. State Bank of Mysore
b.. Yes Bank
c.. Reserve Bank of India
d.. Postal Bank
16..Which one is not appropriate
a.. A Commercial bank can sell mutual fund
products
b.. An urban co-operative bank cannot sell
general insurance products
c.. A Private Sector bank can provide Safe
deposit locker services
d.. A Nationalized bank is not prohibited to
accept articles under safe custody
17..Accepting deposit receipt of another
bank under safe custody article is the
secondary business of a commercial bank.
a.. True
b.. Customer service
c.. False
d.. In fact it is the Primary business
18.. Identify which one is not the liability of a
commercial bank
a.. Fixed deposit
b.. Home Loan which is under NPA
c.. Both a & b
d.. None of these
19.. These are banking companies operating
only in a limited geographical area.
a.. State Co-operative Bank
b.. District Co-operative Bank
c.. Foreign Bank
d.. None
20.. A banking company, whose license is
cancelled can appeal to Banking Ombudsman
within a period of 30 days from the date of the
order rejecting the license.
a.. True
b.. Not Banking Ombudsman, but RBI Governor
c.. False
d.. Neither Banking Ombudsman nor RBI
Governor but RBI Main Office
21.. Banks should submit their request for
new branches, administrative offices,
ATMs for consideration of RBI
a.. As and when needed
b.. Once in a year
c.. Once in every six months
d.. Once in a quarter
22.. Who cannot approach directly RBI for
branch licensing
a.. Regional Rural Banks
b.. Urban Co-operative Banks
c.. Nationalized Banks
d.. Private Sector Banks
23..A Foreign Bank which has a branch in Calcutta
has to
a.. Deposit and keep deposited with RBI a sum of
Rs.20 lacs
b.. Deposit an amount of 20% of the profit each
year as disclosed in the profit and loss account
with RBI
c.. Both a & b
d.. Deposit a token amount as stipulated by RBI
from time to time
24.. The Central Government can exempt
any foreign bank from the requirements on
the recommendations of RBI for a specific
period if the amounts deposited already by
it are considered adequate. On the
cessation of business by any foreign bank
for any reason, these deposits shall from
part of the assets of the company on
which the creditors in India shall have the
first charge.
25..A commercial bank (existing) has a
place of business in both Kolkata &
Mumbai minimum paid up capital and
reserves
a.. Rs. 5 lacs
b.. Rs.10 lacs
c.. Rs.15 lacs
d.. Rs.100 lacs
26..Identify the Act which stipulates that the
subscribed capital of a banking company
shall not be less than half of its authorized
capital and the paid up capital shall not be
less than half of its subscribed capital.
a.. Companies Act
b.. Reserve Bank of India Act
c.. Banking Regulation Act
d.. All these Acts
27..A bank when it receives more than the
specified % of their shares for transfer to
one party, the bank’s board has to refer
the matter to RBI. The Bank shall not
transfer the shares
a.. Without intimating RBI
b.. Without receiving RBI’s acknowledgment
c.. Without intimating Finance Ministry
d.. Without intimating Company Law Board
28.Banks can raise their capital even in the
form of
a.. Innovative debt instruments
b.. Perpetual instruments
c.. Perpetual non cumulative preference
shares
d.. Any one of the above
29..Declaration of dividend by banks require
a minimum 9% of CAR and Net NPAs not
exceeding 7%. The quantum of dividend
that can be declared is based on the levels
of net NPAs and in a graded level
(Maximum 40%pay out ratio) and can be
paid only from current year’s profits
30.. Suresh, a director of a banking
company wish to hold office continuously
for more than 8 years.
a.. He can
b.. He cannot
c.. He can hold only up to 7 years
d.. None
31..RBI may appoint an additional director/s
in the interest of
a.. Public
b.. Banking policy
c.. Depositors of the company
d.. All of these
32.. On the Reserve Bank of India passing a
removal order, the concerned person ceases to
hold office which he/she was holding till then.
Further he/she is prohibited, from directly or
indirectly taking part in the management of any
banking company for a period not exceeding 5
years as may be specified in the order.
Contraventions of the order is punishable with a
find of Rs.250 for each day during which the
contravention continues.
33..When the board of a banking company
is ordered to be reconstituted as per the
provisions of the Banking Regulation Act,
directors will not be removed for the
purpose of reconstitution by
a.. Lots
b.. Majority decision
c.. Both a and b
d.. None
34.. The shareholders of a banking company
are entitled to dividends only before all the
capitalized expenses are written off.
a.. True
b.. False
c.. It is after not before
d.. There is no connection with the
capitalized expenses and declaring of
dividends
35.. Other than the Governor, Deputy
Governors of RBI, the other directors are
a.. Appointed
b.. Nominated
c.. Selected
d.. Elected
36.. RBI issues directions from time to time
regulating the lending operations of banking
companies
* The tools employed for exercising Selective
Credit Control are
• Minimum margins for lending against selected
commodities
• ceilings on the levels of credit and
* charging of minimum rate of interest on
advances against specified commodities
37.. RBI is authorized to regulate interest rates on
loans and advances as well as deposits.
• The Usurious Loans Act. 1918 prohibits lending
at exorbitant rates. The law has been made to
protect the weaker borrowers from the powerful
moneylenders
• RBI has issued guidelines in respect of internet
banking. These cover a.. Technology and
Security issues b.. Legal issue and c .
Regulatory and supervisory issues
38..The first major study by Cadbury
Committee in 1992 led to the introduction
of
a.. Corporate Culture
b.. Corporate Governance
c.. Corporate Social Responsibility
d.. Corporate Sector
39..Reserve Bank of India constituted a
Consultative Group in November 2001
with a view to strengthening the internal
supervisory role of the boards of banks
under the Chairmanship of
a.. Dr.R.H.Patil
b.. Dr.A.S.Ganguly
c.. Dr. Rangarajan
d.. Dr.Chakraborthy
40.. Identify the Committee which issued guidance
for promoting the adoption of sound practices of
corporate governance by banking institutions.
a.. The Basel Committee on Banking Supervision
b.. The Advisory Group on Banking Supervision
headed by Shri M.S.Verma
c.. The Advisory Group on Corporate Governance
headed by Dr.R.H.Patil
d.. Narasimham Committee on Banking Reforms
41..Based on various recommendations of
different committees and the cross-country
experience, the Reserve Bank of India has
initiated several measures to strengthen the
corporate governance in Indian Banking sector
including the concept of this for directors of the
banks.
a.. Disclosure clause
b.. Fit and Proper criteria
c.. Non disclosure clause
d.. Due diligence measures
42..The way in which boards oversee the running
of a company by its managers, and how board
members are in turn accountable to
shareholders and the company and its
implications for company behavior towards
employees, shareholders, customers, banks and
other stakeholders
a.. Corporate Culture
b.. Corporate Value & Responsibility
c.. Corporate Integrity
d.. None
43..The guidance (Basel committee) entitled Enhancing
Corporate Governance for Banking Organizations
highlights the importance of the roles of boards of
directors (with a focus on the role of independent
directors) and senior management.
. effective management of conflicts of interest
. the roles of internal and external auditors, as well as
internal control functions . governing in a transparent
manner, especially where a bank operates in
jurisdictions, or through structures, that may impede
transparency and the role of supervisors in promoting
and assessing sound corporate governance practices
44..In India the Corporate Governance
involves
a.. Reserve Bank of India
b.. Securities and Exchange Board of India
c.. Department of Company Affairs
d.. a, b & c
45..Not a term deposit.
a.. Reinvestment plan
b.. Overdue Term deposit
c.. Flexi Recurring Deposit
d.. Daily collection account
46.. Identify which is the most appropriate one.
a.. Presently RBI decides the bank deposits rates
of interest
b.. Presently RBI decides the rate of interest on
Savings Bank deposits
c.. Presently RBI decides the rate of interest on all
types of lending by banks
d.. Presently RBI decides the rate of interest on
both deposits as well as lending without any
freedom for the banks
47..Banks have to file a return on their
unclaimed deposit within 30 days of the
end of each calendar year.
.. All deposits not operated in 10 years
.. For term deposits, the period of 10 years
starts from the expiry of the period of the
deposit
48.. Rajiv has not nominated for his Recurring
deposit
a.. Still he can nominate
b.. Since at the time of opening/ investing he has
not done, now not possible
c.. He should have nominated then and there only
d.. Nomination facility, if not utilized by the
customer, then bank should be held responsible
49..For a joint account of W & Y the account holders
appointed J as nominee. The settlement condition on
this term deposit being Either or Survivor. If W dies
before the maturity of the subject deposit, then
a.. Bank will delete the name of W after completing
formalities and allow Y to continue as the depositor
b.. Bank will take the consent of J before doing so as
mentioned in (a)
c.. Bank will settle the claim by closing the deposit before
maturity in favor of the claimants
d.. Since J is the nominee and the condition is not Jointly,
the bank would make the payment to J
50.. Chandru is the depositor of a bank. He has an
individual Savings Bank account (nominee is wife), a
Safe Deposit locker in his name along with his wife ( no
nomination but operation condition is Several) and a
Term deposit (reinvestment plan) with his son (Either or
Survivor) (nomination in favor of his wife). On the death
of Chandru, Bank would
a.. Pay the amount on Savings Bank & Term deposit to
Chandru’s wife
b.. Insist the wife of Chandru to close the safe deposit
locker facility and take the contents
c.. Both a as well as b
d.. None
51.. Which one is correct
a.. Both Safe deposit locker facility and Safe
Custody Article facility are one and the same.
b.. The role of banker is different for both Locker
and Article facilities
c.. In locker facility banker is the lessor whereas in
the article facility banker is the bailee
d.. Both b & c
52..Mr.Krishnan one of the depositors has died. He had nominated his
second son as the nominee. The First son, first and second
daughters objected that the bank should not settle the claim in favor
of the nominee. Mrs. Priya Krishnan the wife of the depositor had
already died. However, the depositor’s mother Mrs. Manorama is
still alive.
a.. Bank will have to settle the claim in favor of the two sons and two
daughters.
b.. Under these circumstances the nomination is only a formality.
c.. Bank will get valid discharge by making the payment to the nominee
d.. Bank should not ignore Mrs. Manorama while settling the claim
53..Selective Credit Control seeks to
influence the demand for credit by
* making borrowing more costly for certain
purposes which are considered relatively
inessential or
* by imposing stringent conditions on
lending for such purposes. Or
* by giving concessions for certain desired
types of activities
54..The tools employed for exercising SCC
are
* .. minimum margins for lending against
selected commodities
* .. ceilings on the levels of credit
* .. charging of minimum rate of interest on
advances against specified commodities.
55..A bank wish to advance against shares
of
a.. Private Limited Company
b.. Public Limited Company
c.. Their own Bank
d.. Both a & c not allowed
56..RBI still decides the rate of interest on
a.. Housing loan to an individual
b.. DRI
c.. Car finance
d.. Bills Discounted
57..The Reserve Bank of India (Amendment)
Act,2006(Section 45W) empowers the Bank, in
public interest or to regulate the financial system
of the country to its advantage, to determine the
policy relating to interest rates or interest rate
products and give directions in that behalf to all
agencies or any of them, dealing in securities,
money market instruments, foreign exchange ,
derivatives, or other instruments of like nature
as the Bank may specify from time to time.
58..Banking Ombudsman is an authority
established under the Banking
Ombudsman Scheme, 1995 by the RBI.
The purpose is to resolve and settle the
complaints of banking public against the
commercial banks and the scheduled
primary cooperative banks without
resorting to courts.
59..Banking Ombudsman scheme
applicable to all commercial banks, RRBs
and schedules primary co-operative
banks.
.. Disputes between two banks can also be
taken up with the Banking Ombudsman
..A banking ombudsman may act as an
arbitrator
60..Find out the odd one (Banking ombudsman)
a.. Observance of Reserve Bank directives on
interest rates
b. Non-acceptance of application for loans
without assigning valid reasons to the
applicant
c. Non-issuance of Demand Drafts to customers
d. Non-adherence to prescribed working hours by
branches
61..Identify the correct statement( Banking
Ombudsman)
a.. The Credit card related issues are beyond the
purview of Banking Ombudsman.
b.. The Credit card related issues are within the
purview of Banking Ombudsman
c.. Forced closure of account without sufficient
reason will not come under the purview of
Banking Ombudsman.
d.. Excepting b other two are correct
62.. Shyam , a borrower of bank D has
approached the Banking Ombudsman, since he
is fed up with bank D who has been insisting
him to repay the loan taken by him from the
bank.
a.. Shyam will succeed
b.. The borrower will not succeed
c.. Such matters are not within the purview of the
Banking Ombudsman
d.. The borrower can avoid repaying taking shelter
under Banking Ombudsman scheme
63..A bank has refused to open the account without any
valid reasons. When the matter was referred to the
Bank’s Zonal Office, no response received even after
two months.
a.. The person can refer the matter to Banking
Ombudsman.
b.. Even though he is yet to become the customer of the
bank, he can refer the matter to Banking Ombudsman.
c.. Since he is the non customer he looses the right to refer
the matter to Banking Ombudsman
d.. The person can refer the matter to the Head Office /
Corporate Office of the Bank and then only can
approach Banking Ombudsman
64..When the balance maintained by any
scheduled bank falls below the stipulated
minimum, such a bank shall be liable to pay a
penal interest to RBI.
During the first fortnight , when such shortage
occurs, the penal interest shall be 3% above the
Bank rate and if the shortage continues in the
next fortnight, the penal interest shall be 5%
above the bank rate.
65..
.. Every scheduled bank has to submit a
return to RBI showing the demand and
time liabilities and borrowings from banks
in India
65..RBI has issued guidelines in respect of
internet banking. These guidelines cover
.. Technology and security issues
.. Legal issues
.. Regulatory and supervisory issues
These guidelines apply, in addition to
internet banking, to other forms of
electronic banking to the extent relevant.
66..Identify the odd one
a.. Regional Rural Bank
b.. State Bank of India
c.. Central Bank of India
d.. None of these
67..In the case of banking companies which
are not scheduled banks, as per the
provisions of BR act, the cash reserve
need not be maintained with RBI. It may
be with the bank itself, or in a current
account with RBI or byway of net balance
in current accounts or in one or more of
these ways
68..A bank has to submit a Friday statement
to RBI . The said Friday(22nd of a
particular month) has not been declared
as holiday under the Negotiable
Instruments Act, but the previous working
day and subsequent day were declared .
Then the statement to be prepared as on
a.. 20th of that month b.. 23rd of that month
c.. 22nd of that month d.. 24th of that month
69..Every banking company has to maintain
in India certain amount of assets as per
the provisions of BR act.
.. At the close of business on the last Friday
of every quarter, such assets shall not be
less than 75% of the demand and time
liabilities of the banking company in India.
70..The rate of interest on loans and
advances contracted between a bank and
customer is not liable to be opened by a
court of law.
71..Every banking company has to submit 3
copies of its balance sheet and profit and
loss account to RBI within 3 months from
the end of the period to which it relate. The
period may be extended by the RBI by a
further period not exceeding 3 months.
72..A banking company need to submit copies of
balance sheet and auditor’s report to the
Registrar of Companies.
a. Yes.
b. No
c. The banking company need not submit to
Registrar of Companies.
d. Since they are submitting to RBI there is no
need to submit to Registrar Companies
separately
73..These banks shave to display in a conspicuous
place in their principal office a copy of the last
audited balance sheet and profit and loss
account. This has to be done not later than the
first Monday in August every year.
a.. Multi State Co-operative Banks
b.. Nationalized Banks
c.. Private sector banks
d.. None
 74..RBI is empowered to order special audit of
the accounts of any banking company.
The expenses relating to the special audit to be
borne by the concerned banking company.
.. Every month, a banking company has to submit
to the RBI a return showing its assets and
liabilities in India as at the close of business on
the last Friday of the previous month
75..It is not mandatory to give a copy of the
report to the banking company.
a.. Inspection & Audit report
b.. Scrutiny report
c.. Search report
d.. All these reports
76..Venugopal, an account holder with Bank UB has
requested for the return of a cheque which had been
duly paid by UB (drawee). The banker refused to give
the original but provided a photo copy and charged him
Rs.50 for the same.
a.. The bank is in order
b.. The bank is not in order
c.. The bank should have handed over the original paid
cheque that too without any charges (keeping a photo
copy for their records)
d.. The customer is not in order in getting the original
cheque, since it is the property of the bank once paid by
them. At the most the customer can get a certificate from
his banker and not the paid insturment
77..To order amalgamation of two banking
companies under the provisions of
Companies Act rests with
a.. Central Government
b.. Reserve Bank of India
c.. Central Government with the consultation
of Reserve Bank of India
d.. Company Law Board
78.. Which one is not correct (Winding up)
a.. Central Government can appoint an official
liquidator, attached to the respective High court
for conducting the winding up proceedings
relating to banking companies.
b.. Reserve Bank can be an Official Liquidator
c.. State Bank of India can not be an Official
Liquidator
d.. Other than an individual a banking company
can also act as an official liquidator
79..Within 15 days of the winding up order,
the liquidator has to give notice calling for
claims for preferential payment and other
claims form every secured and unsecured
creditor. The depositors need not make
claims. The claims of every depositor of a
banking company is deemed to have filed
for the amount as shown in the books of
the banking company standing to his
credit.
80.. LJH has been having a savings bank account with a
balance of Rs.738/- and a Recurring deposit account
with a balance of Rs.2750/-. The bank has gone into
liquidation and the official liquidator has proceeded to
settle the claims after completing the formalities. Then
a.. LJH would not get any amount
b.. LJH would get Rs.250 in each account as priority over
all other creditors
c.. LJH would be paid at the discretion of the Official
Liquidator
d.. LJH would get the amount on pro rata basis only.
81..State Bank of India was established under sec
3 of the State Bank of India Act,1955 to take
over the undertaking of the then Imperial Bank
and to carry on the business of banking and
other business in accordance with that act.
.. The Central Government can give directions to
SBI on matters of policy involving public interest
in consultation with the Governor of RBI and the
Chairman of the State Bank.
82. State Bank of India Chairman and
Managing Director are appointed for a
period of 7 years.
a.. For Chairman it is 7 years, but for MD it
is 5 years
b.. For both it is not to exceed 5 years
c.. For both it is not to exceed 6 years
d.. For Managing Director it is 7 years but for
Chairman it is only 5 years
83..The State Bank will act as an agent of
RBI at the places where it has a branch
and where RBI has no branch.
.. To handle government and other
business as required by RBI.
.. The terms and conditions shall be as
agreed between them.
84.. The Central Government may after
consultation with the SBI and RBI by order
in writing authorize a subsidiary bank to
undertake other form of business.
..The State Bank is empowered to inspect
the subsidiary banks
..The auditors are appointed by State Bank
of India in consultation with RBI
85.. The issued capital of the Regional Rural
Bank is held as 15 %:50%:35% by
a.. Regional Rural Bank : State Government
: Sponsor Bank
b.. State Government : Central Bank (RBI):
Sponsor Bank
c.. State Government : Reserve Bank of
India : State Bank of India
d.. None of these
86..The chairman of a RRB is appointed by
a.. The Sponsor Bank
b.. The Sponsor Bank in consultation with
NABARD
c.. The Sponsor Bank in consultation with
NABARD or otherwise in consultation with
the Central Government
d.. The Sponsor Bank only as it has full
power to appoint
87.. Identify the one not appropriate (RRB)
a.. The auditor’s report and report on the working
of the bank need not be placed before the
Parliament.
b.. RRB may transact the business of banking
such as accepting of deposits and lending
money.
c.. RRB is not coming under the purview of
Banking Ombudsman
d.. The auditor’s report and report on the working
of the bank has to be laid before the Parliament
88.. In respect of Nationalized Banks, the
shares other than those held by the
Central Government are freely
transferable. No shareholder other than
the Central Government can exercise
voting rights in excess of 1 % of the total
voting rights of all the shareholders.
89..The directors of Nationalized banks are
nominated by the Central Government or
elected from shareholders.
.. Among others one Chartered Accountant
with not less than 15 years of experience
nominated in consultation with RBI.
.. Not more than 6 directors to be nominated
by Central Government
90..The number of existing Nationalized
banks are
a.. 06
b.. 14
c.. 19
d.. 20
91.. Identify the appropriate one (Nationalized Banks)
a.. For the purpose of Income Tax Act, a Nationalized
Bank is treated as a separate entity
b.. For the purpose of Income Tax Act, a Nationalized
Bank is treated as an Indian company
c.. For the purpose of Income Tax Act, a Nationalized
Bank is not as an Indian company
d.. For the purpose of Income Tax Act, a Nationalized
Bank is treated as a Government of India undertaking
(Public sector undertaking)
92.. State Bank of India act was amended to divide
capital into shares of Rs.10 each instead of
Rs.100/-
• The Banking Companies (Acquisition and
Transfer of Undertakings )Act amended to
facilitate public holdings of shares.
• Authorized capital could be up to Rs.1500/-
crore divided into shares of Rs.10/-each and
also to increase or reduce the authorized capital
between Rs.1500 crore and Rs.3000 crore
93.. All the Nationalized banks have two
Executive Directors.
a.. True
b.. False
c.. The criteria is that a Nationalized bank
has to cross Rs.1 lac crore business to
have more than one ED
d.. Yes. At the discretion of Reserve Bank of
India
94..The minimum paid up capital and
reserves to start banking business by a
cooperative bank is not less than Rs.1.00
lac
.. A co-operative bank not to lend on its own
shares/ unsecured loans or advances to
its directors/ any company or associates
wherein the director has interest
95.. Restrictions not applicable for
unsecured loans/ advances made by a co-
operative bank against bills for supplies or
services made to government or bills of
exchange arising out of bona fide,
commercial or trade transactions.
.. A co-operative bank to get permission of
RBI to open a branch in a new place.
96..If a co-operative bank fails, the depositors of
such a bank is protected upto Rs.1. lac subject
to the provision that
a.. The depositor is not having more than Rs.1 lac
at the time of failure of the bank
b.. The bank has registered with the DICGC
c.. The depositor is not having more than one
deposit account
d.. The depositor has opted for insurance
coverage specifically
97..Banking Ombudsman is
a.. Discontinued and a new company has
been set up.
b.. Not applicable to delays in receipt of
export proceeds
c.. Applicable to adherence to prescribed
working hours by branches.
d.. All the above are not True.
98.. An urban co-operative bank cannot
undertake this business (identify)
a.. Accepting of daily collection deposits
b.. Special deposit schemes for Senior
Citizens
c.. Making available Safe deposit lockers
d.. None of the above
99.. B is the depositor of an Urban co-operative bank. His
deposit got matured on Sunday 4th of a particular month
(the bank holiday). He approached the bank on the next
day 5th of that month (Monday- working day). The bank
made the payment of interest only up to Saturday 3rd of
that month. B demanded interest for Sunday 4th of that
month as well, at contractual rate.
a.. The bank is in order in paying interest up to 3rd of that
month
b.. The customer is entitled for his claim
c.. The customer’s demand is not justified
d.. The bank need not make the payment of one day’s
interest
100.. Identify the possible
a.. A private sector bank cannot take over another
private sector bank
b.. A private sector bank cannot be taken over by a
Nationalized bank
c.. A private sector bank has been taken over by
one more private sector bank which has been
taken over subsequently by another private
sector bank
d.. All are possible
101..Bank depositor D has died. The nominee L has
approached the bank with the necessary claim
application along with the death certificate. On
verification it has been found that before his death D had
cancelled the nomination and not nominated any other
person.
a.. L will not get the amount
b.. Since L is not aware about cancellation he is eligible to
get the amount
c.. D should have consulted L before cancelling the
nomination in favor of L
d.. Bank has to ignore L’s claim and proceed to settle the
amount in favor of the legal heirs of D only
• 102..J is the customer of a Bank for last 7
years. He has not operated the account for
last around 6 months. The bank will have
to treat his account as
a.. Dormant
b.. In operative
c.. Still operative
d.. Unclaimed
103..MM has been introduced by EE and the
account has since been opened by bank
KK. The liability of EE in this respect would
be that of
a.. Monetary
b.. Moral
c.. Pecuniary
d.. Voluntary
• 104..Q has issued a cheque in favor of D. The
cheque is having Account payee crossing. D has
endorsed the same in favor of one J. J’s bank I
is the collecting banker. Drawee bank is U.
• A.. Paying banker need not pay
• B.. Drawee has to honor the cheque if it is
otherwise in order and sufficient balance is there
in the account of Q.
• C.. I is responsible
• D.. None of these
105.. An Usance Bill of Exchange has not
been accepted by the drawee on
presentation. Noting and Protest
a.. Necessary for domestic bills
b.. Compulsory for domestic bills
c.. Compulsory for foreign bills
d.. Not compulsory for foreign bills
• 106.. Truncated cheque would remain with
• A.. Collecting Banker
• B.. Paying banker
• C.. Drawer
• D.. Payee
• 107.. When the customer’s signature on the
cheque is forged there is no mandate to the
bank to pay. As such a banker is not entitled to
debit the customer’s account on such forged
cheque.
.. The drawee of a cheque having sufficient funds
of the drawer in his hands properly applicable to
the payment of such cheque must pay the
cheque when duly required to do so, and, in
default of such payment, must compensate the
drawer for any loss or damage caused by such
default.
• 108..“Payment in due course” means
payment in accordance with the apparent
tenor of the instrument in good faith and
without negligence to any person in
possession thereof under circumstances
which does not afford a reasonable ground
for believing that he is not entitled to
receive payment of the amount therein
mentioned.
• 109..A cheque has been received in
clearing on 27th of this month bearing the
date as 18th of three months ago. The
cheque to be returned on the grounds
a. Stale Cheque
b.. Ante Dated Cheque
c.. Not to be returned
d.. Post Dated
• 110...A cheque has been received by the drawee bank in
local clearing. At that time the account has clear balance
to meet the cheque amount. However, it has been noted
that the Words and Figures differ. The cheque
contained Rs Twelve thousand one hundred and two in
words but in figures read as Rs.12100/- Bank has to
a. Make the payment
b. Dishonor the cheque
c.. Make payment for only Rs.12100/- as per figures
d.. Act as a prudent banker
111.. A cheque has been received for collection. The
Collecting banker has given his necessary certificates on
the reverse of the cheque, which had more than two
endorsements. (not crossed as account payee)
a. It is the responsibility of the collecting banker to verify
the regularity of endorsements
b. It is not the responsibility of the paying bank to verify
the regularity of endorsements
c.. The Collecting bank as well as the paying bank are
responsible to verify the regularity of endorsements
d.. None of the above
• 112.. M has issued a cheque favoring N which has
been received by the drawer’s banker. On scrutiny, it has
been observed that the word bearer was altered into
order again re-altered into bearer. M has signed only the
cheque and not authenticated the alteration.
a.. The drawee bank to make payment.
b.. The paying banker will be in order to return the same
with a reason Material alteration requires drawer’s
authentication
c.. The above is not a material alteration.
d.. The responsibility lies with the payee’s banker and not
that of the drawer’s banker.
• 113.. Allonge is associated with
a.. Will
b.. Insurance
c.. Nomination
d.. None
• 114.. A collecting banker is not
responsible
a.. If a cheque is returned for want of funds
b.. If endorsements are not regular
c.. If a cheque specially crossed is collected
d.. All the above
• 115..On an uncrossd cheque tendered by P to
the credit of his account, the collecting banker Q
affixed his crossing (using the rubber stamp
crossing seal of the bank) on receipt and sent for
collection. Drawee bank being C.
a.. Bank Q will not get protection
b.. Bank Q will get protection
c.. Bank C is in the picture
d.. Bank C is not in the picture
• 116..A paying banker should not act in a
casual manner. To get appropriate
protection under the provisions of NI
Act,1881, he should act in good faith. He
should not have any doubt that the
payment is being made to the incorrect
person. He should act without negligence.
• 117..A Collecting banker should act in
good faith.
He should collect cheques only for his
customer
Cheques should have been crossed
(Generally or specially)
Without negligence he should act.
• 118..The banker to understand his customer
properly and the collecting banker should not act
in a haste or in a causal manner.
The proper identification and opening of account
with due care assumes lot of importance.
A collecting banker cannot avoid his
responsibility, even at a later date, when it is
proved that the account opened was not
properly opened.
• 119..A cheque has been collected by Bank Y.
But the cheque bore the crossing in favour of
Bank S. The cheque is issued by D having
account with Bank X.
a.. The drawee can make the payment since it has
been collected by a bank.
b.. X not to honor
c.. Y is not in order in collecting such a crossed
cheque
d.. Both b & c
• 120..V has issued a cheque favouring M for
Rs.879/- The cheque has been otherwise in
order and the account has enough balance. M
is having account with BS bank and V is the
account holder of JJ bank.

a.. JJ bank not to refuse payment

B.. JJ bank will receive payment
C.. BS bank will not receive payment
D.. BS bank to refuse payment
• 121.. UT, the paying banker has paid the
cheque over looking the endorsements. Later on
it came to the knowledge that the endorsements
were regular but third endorsement was forged.
a.. The drawee is not protected
b.. It is a payment in due course
c.. The paying banker will get protection
d.. Excepting (a) the other two are appropriate
• 122..Bank W has received the cheque signed by their
customer E. The cheque was issued around 4 months
ago. Around 25 days ago at the request of E a fresh
signature was obtained by Bank W. The bank returned
the cheque in question when received ( yesterday in
local clearing) on the ground signature varies.
a.. Bank W will get the protection
b.. Bank W obviously not get the protection
c.. It appears Bank W overlooked the new signature lodged
recently and returned the cheque which is having the
earlier signature
d.. Both b & c
• 123..An account holder has appointed his brother as a
Letter of Authority Holder (LAH) to operate the account.
A cheque issued by the LAH has been received for
payment. But it has come to the knowledge of the bank
that the LHA had recently died.
a.. The bank will be in order in making the payment since
the account holder is alive
b.. The bank will be in order in making the payment since
the LAH is not the account holder
c.. The bank will be in order in making the payment if the
same is counter singed by the drawer
d.. The bank will have to take a decision based on the
association with that of the customer and his support to
the bank
• 124..Bank S opened an account 5 months ago. At the time
of opening of the said account, the bank relied on the signature of
an existing customer of another branch of the same bank. A few
weeks ago they have collected a demand draft (issued by Bank KJ)
on behalf of the account holder and released the payment .
Subsequently, it came to the knowledge of S that the said demand
draft was so altered as to the place of payment as well as the
amount.
a.. Bank S is not at fault
b.. Bank KJ has to bear the loss
c.. Bank KJ is not at fault
d.. Bank S is responsible
• 125..Sisters K & C are having a joint SB account.
Operation condition being Several. A cheque bearing the
signature of both of them have come in clearing and
honored by their banker H. It has been found later on
that one of the signatures was forged. Then bank H
a.. Will get protection
b.. Will not get protection
c.. Will get protection since the operation condition is any
one
d.. Will get protection since it has not been found out within
the reasonable time.
• 126..Varhese issued a crossed cheque in
favour of Sunder for Rs.7345/=. Despite
that the drawee bank has made the
payment over the counter i.e., Cash
Payment. Under the circumstances
a.. The Drawee Bank is not responsible
b.. The Drawee Bank is responsible
c.. The Drawer’s bank is responsible
d.. Both b & c
• 127..A Collecting Banker will get protection under the
provisions of the Negotiable Instruments Act,1881,if
a.. He has collected for a non customer
b.. He has collected for an account holder whose
account has been opened in a very causal manner by
not applying Know Your Customer requirements
properly.
c.. He has collected for an account holder whose
account should not have been opened at all
(incompetent to contract)
d.. He has collected for an account holder whose
account has been introduced by one of the retired
employees of the bank.
128..Bank PR has acted in good faith but with
negligence in collecting a cheque which has not
been crossed. Cheque in question has been
paid by Bank JG (drawee). In case of dispute
a.. Bank JG will be held responsible
b.. Bank PR will be held responsible
c.. Both JG as well as PR would be held
responsible
d.. Neither JG nor PR would be held responsible
• 129.. As per the relevant provisions of of NI Act,1881 a bank can
seek protection only, if there is a material alteration in the cheque
and does not appear to have been altered.

a.. The above is correct

b.. The above is in correct
c.. The material alteration will not alter the
position.
d.. The material alteration will, to some extent alter
the position.
130..A Court order has come and the bank has to make the
payment of Rs.2200/- to the court. Next day a cheque
issued by the drawer for Rs.2828/- has come and at
that time the bank had only Rs.1587/- (in view of the
payment made to the court the previous day). The bank
has to return the cheque for Rs.2828/- to the collecting
banker with the reason
a.. Funds insufficient
b.. Refer to Drawer
c.. Attachment by Court
d.. Garnishee Order received
• 131..Bank SI has paid the cheque for which the drawer
has requested for a stop payment. The bank had duly
acknowledged the letter seeking stop payment. However
honored the cheque in question. The bank defended
their action quoting the acknowledgement in which it has
been clearly mentioned that on account of beyond
control of the bank if anything happens the bank cannot
be held responsible.
a.. The drawer would not get the protection
b.. The drawee would get the protection
c.. The customer would have to be compensated by the
bank
d.. The bank’s stand would be supported
• 132..Bank QR has paid the cheque signed by the Letter
of Authority holder, in good faith. However, they
overlooked the fact that last week the Letter of Authority
holder’s power has been cancelled by the drawer and
duly intimated the bank in writing. The cheque bore the
date of yesterday. Bank QR
a.. Will not get protection
b.. Not a payment in due course
c.. Both a & b
d.. Bank QR to get protection since they have acted in
good faith.
• 133.. Bank D has collected the proceeds on a cheque from Bank O.
A, the customer of D, has not with drawn the amount so collected.
At that time a request comes from Bank O that they have made the
payment by mistake and the cheque in question should not have
been paid since not only the signature of the drawer does not belong
to him but also the entire cheque has been altered. Hence,
requested Bank D to return the amount in question wrongly paid by
Bank O
a.. Bank D need not oblige
b.. Bank D has to oblige
c.. Bank D is answerable to their customer A only, on whose behalf the
cheque has been collected and credited to his account
d.. Bank O can not get the payment, since it was not a payment in due
course
• 134..Paying banker X has returned a cheque
wrongly due to pressure of work. By the time
they could realize, necessary damage has
already been done. X
a.. Acted with negligent
b.. Not a payment in due course
c.. Both a & b
d.. Bank cannot be held responsible since the
happening had not happened with intention.
• 135..A cheque has been issued by drawer Arun
in favour of payee Arvind. The said cheque has
been collected by Krishna’s bank. In fact Arvind
has endorsed the cheque in favor of Krishna.
Then the payment will be received
a.. From Arvind’s bank
b.. From Arun’s bank
c.. By Krishna’s bank
d.. Both b & c
• 136..A cheque issued for Rs.22222/- had to be
returned by the drawee since the balance in the
account at the time of receipt of the said cheque
has been only Rs.2222/- Then the paying
banker has to use the reason
a.. Refer to drawer
b.. Insufficient Funds
c.. Either a or b
d.. Exceeds arrangement
• 137..GDK, a banker has been asked to
collect a bill of exchange on behalf of its
customer. Then the banker would not get
protection as per NIAct,1881 provisions,
as a collecting banker
a.. True
b.. Incorrect
c.. False
d.. Not True
• 138..Identify the inappropriate one (Collecting
banker)
a.. The collecting banker should act in good faith.
b.. The collecting banker should act with negligent
c.. The collecting banker should collect for his
customer
d.. The collecting banker should collect only
crossed cheques and not uncrossed cheques
• 139.. A cheque has been issued by E an agent of an
account holder B who maintains the account with Bank
G. The cheque is issued in favor of E singed by E on
bank G. E has requested G to credit the amount to his
(E’s) account also maintained with G only. G obliges.
a.. Amounts to conversion
b.. Not amounts to conversion
c.. If not specifically permitted by B , then amounts to
conversion
d.. G has carried out the instructions appearing on the
cheque hence will get protection
• 140..Which instrument is always payable
to the payee or to the order
a.. Cheque
b.. Bill of exchange
c.. Promissory Note
d.. None
• 141..After F, collected the amount on a demand draft,
(which has been chemically altered and parted with the
money), U, the paying banker demanded the payment
from the collecting banker. F expressed their inability
since the payee is not traceable. During discreet
enquiries by U (affected banker), it has come to the
notice ,that the collecting banker has not applied due
diligence in opening the account of the payee. U is
contemplating to proceed legally.
a.. U would succeed
b.. F would get the order in their favor
c.. U would not succeed but F would not be spared
d.. F since helpless, U would have to bear the loss
• 142.. A person approached the bank B for opening of an account
giving the reference of a VIP of the town. At the request of the new
person, the banker B contacted the VIP over phone based on the
telephone number furnished by the new person. After the
conversation, the account was opened. Subsequently, a cheque
collected by B happens not to belong to the payee. Then bank B
a.. Would not get protection
b.. Would get protection, since the bank has taken the precaution to
talk to the VIP before opening of the account
c.. Would get protection
d.. Would get protection, since there is no negligent on the part of B
and further B has acted in good faith and collected for his customer
only
• 143.. A partnership firm is enjoying CC
limit of Rs. 30.00lacs. The liability is Rs.
29.28 lacs. A cheque received in clearing
for Rs.1.10 lac is to be returned. Identity
the appropriate reason.
• A.. Insufficient funds
• B.. Not arranged for
• C.. Refer to Drawer
• D.. None
• 144..A banker
a.. Can be a Drawee
b.. Can only be a paying banker but not a
Drawee
c.. Who is the drawee will also be the paying
banker.
d.. Can neither be a paying banker nor a
Drawee at the same time.
• 145.. While writing a cheque the drawer has
altered the name of the payee. He is required to
affix his full signature.
• A.. Since altering of the payee’s name amounts
to material alteration
• B.. His full signature is required to complete the
formality.
• C.. His full signature is required to establish his
consent
• D.. Both a & c
• 146..A cheque which is truncated during the
course of a clearing cycle, either by the clearing
house or by the bank whether paying or
receiving payment, immediately on generation of
an electronic image for transmission, substituting
the further physical movement of the cheque in
writing
• A.. Digital cheque b.. Truncated cheque
• C.. A cheque in the electronic form
• D.. None
• 147..In case of payment through truncated
cheque, the proof of payment is
• A.. Physical image
• B.. Details of cheque on the statement
• C.. A certificate issued on the end of the
printout of the electronic image of a
truncated cheque by the banker who paid
the instrument
• D.. No separate proof needed
• 148..A cheque which contains the exact mirror
image of a paper cheque, and is generated,
written and signed in a secure system ensuring
the minimum safety standards with the use of
digital signature ( with or without biometrics
signature) and asymmetric crypto system/
• A.. Truncated cheque b.. A cheque in the
electronic form c.. Digital cheque d.. Future
Cheque form
• 149..Which statement is appropriate
• A.. A post dated cheque can be paid
• B.. A stale cheque can be paid
• C.. A post dated cheque should not be
honored
• D.. None
• 150..One R issued a cheque for commercial transaction
a cheque for Rs.7777/- in favor of W. W handed over
the cheque to his banker D, who sent it in clearing. The
cheque was returned by the drawee for the reason “
account closed”. W wish to proceed against R for the
reason Insufficient funds.
• A.. W would not succeed
• B.. W cannot proceed since the reason for the return of
cheuqe is not insufficient funds
• C.. Still W can proceed for the reason insufficient funds
• D.. W has to get confirmation from his banker D before
proceeding as above.
• 151..Since C could not succeed in getting the
money on a cheque which has been returned for
the reason insufficient funds, he wanted to
present once again the cheque. But his banker
advised him the same cannot be done.
• A.. His banker is right
• B.. There is no bar . C can present the cheque
more than one time
• C.. However the same has to be done within the
validity of the cheque in question
• D.. Both b & c
152..As per the appropriate Section of the NI Act, a
Magistrate in a case ( Dishonour of cheque for the
reason insufficient funds) wish to issue summons to the
accused through courier service.
a.. He is in order in doing so
b.. Such courier service must have been approved by the
Judge of High court
c.. Such courier service must have been approved by a
Court of Session
d.. The Magistrate himself has the powers to take a
decision about identifying the appropriate courier in the
absence of speed post facility.
• 153..A collecting banker has sent the cheque for
collection drawn on an upcountry place. Before
the receipt of the said cheque by the paying
banker, the drawer died and the cheque in
question has been returned for that reason.
Since payee has been deprived of the payment
whom he should charge
• A.. Collecting banker
• B.. Paying banker
• C.. Both of them
• D.. None of them
• 154.. A cheque has been materially altered. For want of
authentication the cheque was returned. Once again it
was presented after due authentication by the issuer.
When it was received for the second time, the drawee
returned the cheque with the reason insufficient funds.
However at the first instance sufficient balance was
there.
• A.. Drwaee is responsible
• B.. Collecting Banker is responsible
• C.. Paying banker is responsible
• D.. Drawer is responsible
• 155.. A cheque has been issued in connection with a
payment due. Thinking that the same has been paid, the
drawer has withdrew some amount. When the cheque in
question came, the banker has returned the same for
insufficient funds. In fact the shortage was only Rs.55/-
The customer became furious and charged the banker.
• A.. Paying banker will be protected under payment in
due course
• B.. Drawer will not succeed
• C.. Drawee has acted within the parameters
• D.. All are appropriate
156.. Contract of Indemnity and Surety are
discussed in the Act
a.. Negotiable Instruments
b.. Sale of Goods
c.. SARFAESI
d.. None
157..A contract of indemnity has two parties.
.. The indemnifier has to make good the loss
as soon as it occurs.
.. There are only two parties to a contract of
indemnity and hence only one contract.
.. An indemnity is for the reimbursement of
loss
158.. In an indemnity the risk is contingent
whereas in a guarantee the liability is subsisting.
a.. The above is correct
b.. The above is incorrect
c.. For indemnity the risk is subsisting and for
guarantee the liability is contingent.
d.. For both risk contingent and liability subsisting
159..Identify the role of indemnity.
a.. Bank has given a loan to C on the surety
of F.
b.. Bank has settled the death claim in favor
of minor legal heirs
c.. Bank for issuing a demand draft to a
student
d.. Bank for issuing a credit card to one of
the valued customers
160..In banks generally the indemnity is part
of
a.. Issuing a Duplicate or Triplicate demand
draft
b.. To cover the possible future loss
c.. To break open the locker under special
circumstances
d.. All the above
161..Contract of indemnity is discussed in
a.. Securitization Act
b.. Transfer of Property Act
c.. Contract Act
d.. Banking Regulation Act as well
162.. Which statement is appropriate
(indemnity)
a.. The other name for surety is indemnity
b.. There is no other name for indemnity
c.. The other name for guarantee is
indemnity
d.. Indemnity is also known as counter
guarantee
163..Issuing of Bank guarantees is one of
the functions of a banker.
It is a Non fund based finance extended by
a bank.
To secure the bank guarantee in addition to
necessary securities, the bank will have to
obtain a suitable Counter guarantee or
Counter indemnity to safe guard their
interest
164.. Bank B has issued a guarantee on
behalf of their borrower E in favor of the
Department L. Identify the Surety,
Beneficiary and Principal debtor
a.. B, L & E
b.. B, E & L
c.. L, B & E
d.. E, L & B
165.. Bank has issued a guarantee with a protective clause
in which it is mentioned that their liability will cease after
the expiry date. Still the bank insist the beneficiary to
return the guarantee (original) duly cancelled or to that
effect a written communication that there are no claims
from the beneficiary is obtained to
a.. Protect the interest of the banker
b.. Protect against any possible development
c.. Fulfill one of the formalities attached to issuing of Bank
guarantees
d.. Complete the normal function of a banker who issues a
Bank guarantee.
166.. Bank guarantee is the commitment
given by the issuing bank (Guarantor) to
the beneficiary.
If the claim is made by the beneficiary
within the guarantee period and as per the
terms and conditions of the bank
guarantee, then the bank should make the
payment without fail and also without any
delay.
167.. Courts will not interfere in the
functions of a banker with regard to bank
guarantees issued by them.
The Courts will not prevent the bank from
making the claim amount on the bank
guarantee.
The Courts will interfere only when there is
a mala fide intention or fraud or forgery
takes place.
168.. Banks generally issue Performance
guarantees.
Advance payment , Deferred payment and
Statutory guarantees are also being issued by
banks
Before issuing a bank guarantee, the bank will
go through the draft copy and after satisfying
with the contents they agree to issue.
Besides the documents for various types of
securities, appropriate counter guarantee also to
be taken.
 169..Amount of guarantee, period,
protective clause, claim period ,
beneficiary are some of the important
aspects which are to be clearly
understood and put in place to avoid
complications at a later date.
.. If claim has come from the beneficiary
utmost importance to be given and due
action to be taken.
 170.. Beneficiary U has invoked the guarantee. Bank B
has to make the payment. At that time B has a collateral
security of Rs.4 lacs (Term deposit) and not enough
balance in the current account of the party. The claim
amount is Rs.7 lacs.
a.. Obviously B will have to foreclose the Term deposit and
make payment
b.. For the balance amount B can approach U with a
request for some more time
c.. Since the amount of the collateral security will not be
sufficient to meet the claim amount, B can desist from
settling the claim of U.
d.. None of these
171.. Having given the commitment under a Bank
guarantee, Bank JK had to make the payment when
revoked by the beneficiary DG. In the process JK
advanced a sum of Rs.2 lacs to F and adjusted the
collateral security of Rs.3 lacs (by closing before maturity
the Fixed deposit )and settled the claim .
a.. F can take objection for the action of JK.
b.. JK is in order in carrying out as stated
c.. The counter guarantee given by F allows JK to act
accordingly
d.. Both b & c
172.. When the contingent liability on a
bank guarantee becomes a regular
liability?
a.. On invocation of the guarantee
b.. When payment is made by the bank
c.. When payment is refused by the bank
d.. None of these
173.. Bank JY has issued a performance
guarantee (fully secured by way of Fixed
Deposit). Then JY
a.. Need not obtain counter guarantee or counter
indemnity
b.. Need to obtain counter guarantee or counter
indemnity as applicable
c.. can waive both of them
d.. Better to consult its Head Office before
proceeding further
• 174..In banks generally the guarantee is
part of
a.. Issuing a Duplicate or Triplicate demand
draft
b.. To cover the possible future loss
c.. To break open the locker under special
circumstances
d.. In all these cases it is indemnity and not
guarantee.
• 175..Indemnity holder vvv has incurred
certain genuine expenses.
a.. She is entitled to recover from the person
who has given the indemnity.
b.. She is entitled to recover from the
indemnifier
c.. Both a & b
d.. She is entitled to recover from the
indemnified
• 176.. A bank locker has to be opened forcefully
because of certain developments. The same
was carried out in the presence of the legal heirs
of the locker holder( who is no more now) In the
process the bank overlooked to obtain
appropriate indemnity.
• A.. The bank is in order
• B.. The bank is not in order
• C.. Since the same has been opened in the
presence of legal heirs bank is in order
• D.. None
177..A Letter of Credit is a commitment by
the LC opening bank to the beneficiary
(Exporter or Seller) to make payment.
.. Banks under a LC deal in documents
.. LC terms and conditions should not be
vague .
178.. As in the case of Bank guarantee, the
payment under the LC – Bank’s obligation
is primary.
.. Exceptional cases the Court would
interfere with the machinery of irrevocable
obligations assumed by the banks, such
as, clear cases of fraud of which the banks
have notice.
179..LC documents include Bill of
exchange, Invoice, Transport documents
(like Airway bill, Bill of Lading, LR,RR,)
Post parcel receipts, Insurance
documents, Packing list, Certificate of
Origin, Quality certificate and so on
180.. A Negotiating banker (the bank in the
beneficiary / Exporter’s country) negotiates the
bills (makes payment on the bills drawn by the
seller and accepts the documents). He is also
known as Nominated or Paying banker.
.. A confirming banker has to undertake on its
part the liabilities of the credit vis-à-vis the
beneficiary or the Negotiating bank.
.. Reimbursing bank is appointed by the issuing
bank to make reimbursement to the Negotiating,
Paying or Confirming bank
181..Which one is a transport document
a.. Bill of Exchange
b.. Bill of Entry
c.. Bill of Lading
d.. None of these
182.. Among other requirements LC specifically
required that the invoice to contain quantity in 10
kg basis. However,the invoice has been made
for 100 kg instead of 10 kg basis.
a.. Will be treated as a discrepancy & not likely to
get payment
b.. Not an insignificant one
c.. Not an alarming issue
d.. It is insignificant
183.. Uniform Custom and Practice for
Documentary Credits – UCPDC 600 came
into effect on
a.. 25th October 2006
b.. 25th October 2007
c.. 1st July 2007
d.. 1st July 2008
• 184..According to UCPDC 600
reasonable time for acceptance or refusal
of document by a
a.. Definite period of 5 banking days
b.. Definite period of 5 working days
c.. Definite period of 3 banking days
d.. Definite period of 7 banking days
• 185..A Deferred payment guarantee is
generally associated with
a.. Current goods purchase and sale
b.. Capital goods purchase and sale
c.. Both a & b
d.. None
186..Bills are classified into inland, foreign,
demand, Usance, Clean, Documentary.

.. Demand bills are always purchased

whereas time bills are discounted.

.. Bills can also be accepted by banks on

collection basis
187..M, a customer has tendered an upcountry
cheque to his banker J, who accepted on
collection basis. After sending the cheque for
collection, at the request of M, J has purchased
the same. Then the relationship between the
banker and customer would be
a.. Agent – Principal
b.. Creditor – Debtor
c.. Debtor – Creditor
d.. Principal - Agent
188.. Noting and Protest applicable
a.. When a bill is dishonored on account of
non acceptance
b.. When a bill is dishonored on account of
non payment
c.. When a foreign bill meets with the
situation mentioned in both a and b
d.. All of these
189.. A cheque purchased has been
returned with the reason “Funds
insufficient”. Then the bank which
advanced finance has to
a.. Recover the finance from the drawer
b.. Recover the finance from the drawee
c.. Recover the finance from the payee
d.. Forego the advance lent
• 190.. A has sold the goods to B who has agreed
to pay the amount after 77 days. Then who will
be drawing a Bill of Exchange. If Promissory
Note is to be there instead of Bill of Exchange
who will make it.
• A.. Both cases Seller
• B.. Seller and Purchaser
• C.. Purchaser and Seller
• D.. Both cases Purchaser
191..Depending upon the nature, value of
securities accepted by the banks,
necessary/ appropriate Loan documents
are to be taken to secure the securities/
money lent and also to protect the interest
of the bank.
.. If proper / adequate precautions are not
taken bank not only loose the security but
also the chances of recovery.
192..Various types of Bank securities
include Land/ Real Estate, Stocks and
Shares, Debentures, Goods, Documents
of Title to goods, Trust receipts, Life
Policies, Post office NScs,, Term deposits,
Book debts, Gold ornaments and so on.
Banks also consider Supply Bills finance
as well.
193.. Without stamp duty which instrument
is considered valid?
a.. Agreement
b.. Cheque
c.. Promissory Note
d.. Acknowledgement of liability
194..Bank has considered the Life policy of
the borrower as security. Then the
transaction will involve
a.. Pledge
b.. Hypothecation
c.. Assignment
d.. Both c & a
195....YVU (P) Ltd company has been sanctioned a
Supply Bills limit of Rs.7 lacs.
a.. The Charge need not be registered with the
Registrar of Companies since Supply Bills is
treated as an unsecured finance
b.. The Charge has to be registered
c.. The Charge has to be registered since Book debts
are considered as Collateral security
d.. No connection with the Registrar of Companies
since the bank only gives the finance
196.. Identify which one is an actionable
claim
a.. Life Policy
b.. Cheque
c.. Promissory Note
d.. Bill of Exchange
197.. The Irrevocable Power of Attorney is
also insisted as one of the documents in
respect of
a.. Life Policy Loan
b.. Term deposit Loan
c.. Clean OD
d.. Supply Bills Finance
198.. Bank GD has advanced on the security of a
life policy of the borrower. The same has been
dully assigned and registered in favor of the
assignee. When the repayments are regular, the
borrower dies. Then claim amount will be made
by the insurance company to
a.. Nominee
b.. Assignee
c.. Assignor
d.. Legal Heirs of the borrower
199.. There are 6 types of Mortgages.
The Transfer of Property Act discusses
about the Mortgages.
The basic requirements include
An intention to create mortgage by the
owner of the property (mortgagor) in favor
of the Mortgagee (Creditor) to secure a
debt
200.. BBH, a Ltd company has availed
finance by way of Simple Mortgage. Then
there
a.. Will be two types of Registrations
b.. One with the Registrar of Companies
c.. Another with the Sub Registrar of
Assurances in whose jurisdiction the
mortgaged property is situated
d.. All of these
201..As per the provisions of the
Registration Act,1908, a registered
document operates, not from the date of
its registration , but from the time of its
execution. Thus a Mortgage document
executed earlier, though registered later
than another, has priority over the
documents executed later
202..On 22.09.09 an equitable mortgage has been created
by W in favor of Bank VPV. On the same property W
succeeded in getting a finance by way of Simple
mortgage on 11.10.09 from Bank B. Bank B ensured that
the said mortgage was registered in their favor on
11.10.09 itself.
a.. Bank B will get the priority
b.. Bank VPV will get the priority
c.. Bank B will get the priority since they have got the
registration of the mortgage within the permitted period
d.. Neither Bank B nor VPV would get the priority
203..Limitation period on a Term loan
a.. 3 years
b.. 12 years
c.. 3 years from the date of disbursement
d.. None of these
204.. Bank M has considered a simple mortgage on 25th of
June. The same borrower managed to obtain another
mortgage loan (Simple mortgage) on 27th July (same
year) from another bank (Bank E) on the same property.
Bank E got the simple mortgage deed registered on 27th
of subsequent month. Bank M also got the mortgage
deed registered in their favor on 24th three months from
the date of mortgage. Which bank would get the priority
a.. Bank M
b.. Bank E
c.. Both will not get priority
d.. Priority will have to be decided by a competent court
based on the merits
205..Pledge cannot be created in the case
of
a.. Goods which are existing
b.. Future goods
c.. Both a as well as b
d.. None
206..The term Hypothecation is not
discussed in
a.. Transfer of Property Act
b.. Contract Act
c.. Sale of goods Act
d.. All of these
207.. Which one is more appropriate when
the goods in process has been considered
as one of the securities by the lending
banker.
a.. Hypothecation
b.. Assignment
c.. Pledge
d.. Lien
208.. BDG & Co is an existing partnership firm.
There are 4 partners. One of the partners son
who is yet to become a major has been taken as
the 5th partner with the consent of the other
existing partners.
a.. Possible
b.. Not possible
c.. He can be a partner only to receive benefits
d.. Still he cannot be a partner
209..When Rakesh has been admitted to the
partnership on 13.08.09 he was a minor. He
gave his consent to be a regular partner in the
firm wef 13.10.09. He became major on
13.09.09. Identify from which date he would be
held liable.
a.. 13. 08.09
b.. 13. 09.09
c.. 13. 10.09
d.. None
210..Though the Karta is considered as an
important person in the affairs of a Joint Hindu
Family it is
a.. Advisable to obtain the signatures of the adult
members as well as the karta while opening a
bank account
b.. Same as mentioned in (a )is applicable while
lending
c.. It is enough if only karta signs the documents
d.. In addition to c it is advisable to intimate the
other adult co parceners about the happening.
211..Identify the Public documents
a.. Memorandum of Association & Certificate
of Commencement of Business
b.. Certificate of Incorporation & Certificate
of Commencement of Business
c.. Articles of Association & Resolution
d.. None
212..A customer of a bank has been enjoying an overdraft
facility. Since his dealings have not been satisfactory,
the bank terminated the overdraft limit after giving him
reasonable opportunity including in writing. Subsequently
the cheques issued by the customer not honored. The
aggrieved customer
a.. Can charge the bank for their inaction
b.. Can get protection since he has been put to
inconvenience by the banker
c.. Both a & b not possible
d.. Both a & b possible
213..D has taken a vehicle loan from Bank V. Besides Demand
Promissory Note, she has executed Hypothecation agreement. One
of the clauses in that agreement clearly states that even if one
installment or one interest is not paid automatically that over due will
make the entire liability over due. Further the creditor bank has the
right to ask the borrower to repay the entire liability. D has not paid
2 installments. Then
a.. V can recover the entire money outstanding
b.. V can recover the entire money outstanding plus updated interest
and other charges (as agreed if any)
c.. D is required to regularize the account by paying only the unpaid
installments and interest
d.. D is not required to pay any amount now and she can pay once at a
time in lump sum after certain period.
214..A Company has approached the bank for finance. The
documents have been executed. But the Common Seal
has not been affixed on the loan documents while
executing .
a.. Bank cannot recover the amount lent
b.. Bank can recover the amount lent
c.. Unless other wise specified in the Articles of
Association, affixing of Common seal is only
optional
d.. If both the parties agree (lender / creditor bank and the
borrower/ company) then affixing of common seal can be
waived.
215..A LTD company has been sanctioned certain
credit limits . The date of application 12th
February; Sanction letter by the bank
27thFebruary; Execution of loan documents 22nd
March and Finance availed on 29th March (all in
the same year). Then charge to be registered
within 30 days wef
a.. 27th February
b.. 22nd March
c.. 12th February
d.. 29th March
216.. Modification applicable
a.. When enhancement in the amount of the
finance enjoyed by the company already
registered
b.. Change in the margin for a stock security
under hypothecation
c.. Additional security of the company’s land
under Simple Mortgage
d.. All these cases
217..Government of India has introduced
electronic filing of returns. Banks and other
charge holders are required to file the
particulars of the charges created in their
favor by the companies under this method.
This is to ensure reduction in delays and
one point availability of information about
any company
• 218..A partnership firm has not been registered. At the
time of opening of the account they assured to get the
same registered. After some time the partnership firm
was given CC against stock and on the collateral
security of receivables. When the bank filed a suit for
recovering the money lent against the firm and their
major debtors, the major debtors objected to the same.
• A.. The bank cannot recover from the major debtors
• B.. Bank is not part of the sales and hence cannot
recover from the major debtors
• C.. Bank has overlooked the fact that the firm is yet to be
registered and hence cannot sue the major debtors of
the firm
• D.. Both a & c